Wright, a $1.2 billion maker of ankle replacements as well
as implants to fix hammertoe, a deformity of the toe joint, is a
prime acquisition target because of its growth prospects, Summer
Street Research Partners said. Wright’s sales are projected to
top $600 million by 2017, up more than 150 percent from this
year, according to analysts’ estimates compiled by Bloomberg.

Stryker Corp. (SYK) last week offered Mako, which pioneered the
use of robot-assisted surgery in orthopedics, a price that’s 89
percent more than the stock’s 20-day average, the second-highest
premium ever paid for a medical-products deal larger than $500
million, data compiled by Bloomberg show. To capitalize on
technological advancements in orthopedic surgery and help
restart growth, other large device makers such as Zimmer
Holdings Inc. (ZMH) and Johnson & Johnson (JNJ) also may be looking at
acquisitions, Piper Jaffray Cos. said.

“The appetite is out there,” Matt Miksic, a New York-based analyst at Piper Jaffray, said in a phone interview.
“From the target side, there are some in the growthier, more
attractive medical-device markets. Wright Medical is one.”

Julie Tracy, a spokeswoman for Arlington, Tennessee-based
Wright, declined to comment on whether the company has been
approached by suitors or is weighing a sale.

Big Premium

Representatives for Warsaw, Indiana-based Zimmer and J&J in
New Brunswick, New Jersey, declined to comment on their interest
in acquiring orthopedic-device makers.

Stryker agreed to pay $30 a share for Mako, which had an
average price of $15.90 in the 20 days leading up to the Sept.
25 deal announcement. It’s the industry’s biggest premium since
J&J offered breast-implant maker Mentor Corp. a record 101
percent in 2008, data compiled by Bloomberg show.

The transaction values Mako at $1.35 billion after
accounting for its net cash. At about 12 times its sales for the
past year, that’s almost triple the industry’s median takeover
multiple, the data show.

While Wright’s enterprise value of 4.5 times next year’s
estimated sales is the highest among its orthopedic device
peers, it’s still a fraction of what Stryker is paying for Mako,
the data show. Wright jumped 1.9 percent the day of the deal,
and the stock is up 26 percent this year.

Growing Market

The market for orthopedic extremity devices, in which
Wright operates, will grow by more than 6 percent a year to
about $5.3 billion by 2021, according to Toronto-based
Millennium Research Group Inc., which studies the medical-technology industry.

“Demographic factors -- such as the aging U.S. population,
the expanding active population, and the increasing incidence of
obesity, osteoarthritis, and osteoporosis -- will drive the
number of people that will require treatment with orthopedic
extremity devices,” a Millennium Research report published in
June said.

Analysts on average project that Wright’s revenue will be
about $638 million in 2017, up from the $239 million forecast
for this year, estimates compiled by Bloomberg show.

“The potential for many years of solid double-digit
topline growth differentiates Wright from its orthopedic peers
and makes it a prime acquisition target,” Mark Landy, a Boston-based analyst at Summer Street Research, wrote in a Sept. 25
report.

Takeover Appeal

Wright’s $290 million sale of its hip and knee
reconstruction business this year adds to its takeover appeal,
according to Brean Capital LLC’s Jason Wittes.

The divestiture “made it a really attractive pure play in
foot and ankle,” the New York-based analyst said in a phone
interview. “It’s a very well-positioned, fully-developed
business in foot and ankle, which is at this point the fastest-growing market in orthopedics.”

Even so, Wright may not fetch as rich of a price as Mako
did, Wittes said.

The valuation Stryker offered Mako shareholders “was
surprising,” he said. “Stryker is paying a lot for it. I
wouldn’t initially expect others to get taken out at such high
premiums.”

Wright’s Chief Executive Officer Robert Palmisano has a
history of selling companies. He was at the helm of medical-device maker Ev3 Inc. when Covidien Plc acquired it for $2.5
billion in 2010, and ran Summit Autonomous Inc. until Alcon
Laboratories Inc. agreed to buy it for about $900 million in
2000 to enter the laser eye-surgery market.

Other Targets

“Wright is unique in that it’s been skippered by a CEO who
is known for tuning up operations in medtech and then selling
them,” said Piper Jaffray’s Miksic.

Tornier NV (TRNX), a Dutch maker of replacements for upper and
lower extremities, is another potential takeout candidate,
Miksic said. Tornier, with a market value of $932 million, is
forecast by at least one analyst to have $430 million of revenue
in 2017, a 35 percent increase from this year, estimates
compiled by Bloomberg show.

NuVasive Inc. (NUVA), which has a market value of $1.1 billion,
also may fit what buyers are looking for, according to Mike Matson, a New York-based analyst at Needham & Co. NuVasive’s
devices treat spinal problems. Revenue at the San Diego-based
company is projected to climb to $855 million in 2017 from $658
million this year, the data show.

Large medical-technology companies are likely seeking
targets with “commercialized products, differentiated
technologies, and higher revenue growth that operate in
attractive markets” adjacent to their own, Matson wrote in a
Sept. 26 report. Among the stocks he covers, NuVasive and Wright
“best match this profile,” he wrote.